Should I make a pre-auction offer on a property?

What is a pre-auction offer?

A lot of properties in Australia sell at auction. There's a set time and place where buyers bid, and the highest bidder (in theory) wins.

But there's nothing stopping you from contacting the real estate agent before the auction and making a pre-auction offer.

If your price is high enough and the seller is keen on a quick sale, a pre-auction offer lets you skip the queue. And the stress of auction day.

When is a pre-auction offer a good idea?

Auctions are an incredibly popular way to sell homes in Australia. There’s no upper limit to what one could receive at auction, and the competitive bidding environment can serve to push prices skyward.

But there are plenty of reasons why a vendor might want to avoid auction.

Auctions can be expensive

When taking into account marketing and the services of an auctioneer, Openagent.com.au estimates the expense of marketing a $700,000 home for auction could be between $6,000 and $9,000.

The auctioneer's fee can cost between $400 and $1,000. When you add in real estate commission, this all eats into the seller's profits.

Auctions can take time

Some sellers may have already found another property and may be keen to sell their old property as quickly as possible. In a situation like this, a four-week marketing campaign for an auction can seem like an eternity. They may be keen to sell the property faster.

How to make a pre-auction offer in 4 steps

The best thing to do is to ask the real estate agent if the seller is open to a pre-auction offer. It never hurts to ask.

1. Do the research. As a buyer, your goal is to work out a price that's both suitable for you but also competitive enough to persuade the seller to skip the auction. Check recent sales of similar properties in the area and attend a lot of auctions and inspections. This gives you a clearer idea of the true market value of a property.
2. Show genuine interest. Demonstrate to the vendor and their agent that you’re interested in the property. Attend several of the open inspections, build a rapport with the agent and show you’re serious about the property. Ask the agent for the contract of sale.
3. Make a pre-auction offer they can’t refuse. Remember, you’re trying to convince the seller that it’s worth avoiding the auction to take your offer. You’re not going to accomplish that with a lowball price. You could offer enticing terms as well, like a short settlement time.
4. Be prepared. If your offer is accepted, you’ll need to have your deposit cheque ready to deliver to the vendor as soon as your offer is accepted. It also means you’ll want to have finance in order for you to move to settlement in a reasonable timeframe.

Expert insight

"Pre-auction offers are very common, but whether they are a good idea or not comes down to the campaign, the strength of the market and the vendor's situation. Many buyers make the mistake of trying to force a pre-auction offer, only to show their hand and/or annoy the agent. It's always a delicate process, and one where price disclosure can have an adverse effect if the buyer hasn't obtained all of the necessary facts from the agent."

Cate Bakos

Buyer's agent and property expert

Being prepared before making an offer puts you in a stronger position

A lot of the work in step 4 takes place before you make a pre-auction offer. You're in a better position if you've had a conveyancer look over the contract of sale before you put in your offer.

If you want to get building and pest inspections done, sort this out in advance.

Comparing home loan options and getting pre-approval ahead of time puts you in a stronger position too. Once you make the offer you need to be ready to move fast.

Is a pre-auction offer the best strategy for you?

There’s every possibility that a pre-auction offer will see you paying more for a property than if you had gone to auction.

If your offer is rejected, you run the risk of adjusting the vendor’s price expectations upwards. This means the vendor and their agent can now tell any other potential buyers that they’ve had interest above the original price guide.

Your offer now becomes the floor for everyone else.

If you do choose to make an offer prior to auction, you should do so because market conditions seem to favour buyers, and you think you can secure the property at a reasonable price without competing with others at auction.

Written by

Richard Whitten

Senior Money Editor

Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University. See full bio

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Richard has written 656 Finder guides across topics including:

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